Entrepreneurship In The 21st Century

Many definitions of entrepreneurship can be found in the literature describing business processes. The earliest definition of entrepreneurship, dating from the eighteenth century, was deemed to mean an economic term describing the process of bearing the risk of buying at certain prices and selling at uncertain prices. Later, the term broadened to include the concept of bringing together the factors of production. This definition led others to question whether there was any unique entrepreneurial function or whether it was simply a form of management. In more recent times, the concept of innovation was added to the definition of entrepreneur-ship. Innovation would blossom into many categories: Process innovation, market innovation, product innovation, factor innovation, and organizational innovation. The most recent definitions have described entrepreneurship as involving the creation of new enterprises whereas the entrepreneur is the founder.

Considerable effort has also gone into trying to understand the psychological and sociological underpinnings of entrepreneurship. These studies have noted some common characteristics among entrepreneurs; most entrepreneurs have a need for achievement, perceived locus of control, orientation toward intuitive rather than logical reasoning, and a risk-taking propensity. In addition, many have commented upon the common, but not universal, thread of childhood deprivation, minority group membership and early adolescent economic experiences as typifying the entrepreneur.

At first glance then, we may have the beginnings of a definition of entrepreneurship. However, a detailed study of both the literature and actual examples of entrepreneurship tend to make a definition more difficult, if not impossible to precisely define.

Consider, for example, the degree to which entrepreneurship is synonymous with bearing risk, innovation, or even founding a company. Each of the terms described above focuses upon some aspect of some entrepreneurs. If this holds true, then the likes of Thomas Watson of IBM or Ray Kroc of McDonald’s will never qualify; Few scholars would seriously argue that these individuals were not entrepreneurs.

Although risk bearing is an important element of entrepreneurial persona, many entrepreneurs have succeeded by avoiding risk by seeking others to bear said risk. As one extremely successful entrepreneur has said, “My idea of risk and reward is for me to get the reward and others to take the risks.”

Creativity is often not a prerequisite for entrepreneurship either. Many successful entrepreneurs have been good at copying others and somehow improve on the idea; they will be remembered for innovating one part that was essential to a product’s success.

Many questions about the psychological and social traits of entrepreneurs still arise. How is it that successful and unsuccessful entrepreneurs can share the characteristics commonly identified? Furthermore, certain studies often show decreasing ‘entrepreneurship’ following a successful venture for the entrepreneur. This tends to disprove the centrality of character or personality traits as a sufficient basis for defining entrepreneurship.

Thus, we are left with a range of factors and behaviors which characterize entrepreneurship in some individuals. All of the above tends to reinforce the view that it is difficult, if not impossible to define what an entrepreneur is. The word itself can be best used in the past tense to describe a successful business person.

Measuring Entrepreneurship

Despite the murkiness of the current finding concerning the entrepreneur, there still remains a powerful impulse, particularly amongst enterprise development practitioners, to measure entrepreneurship in some way. These measurement attempts can range from simple checklists through to complex and detailed computer programs. The need for a definition and measure of entrepreneurship is driven by the notion that it is the entrepreneur who is the agent of success at the launch of any business.

He or she is the person who perceives the market opportunity and then has the motivation, drive and ability to mobilize resources to meet demand. The major characteristics of entrepreneurs that have been listed by many commentators include the following.

” Self confident and multi-skilled.

” Confident in the face of difficulties and discouraging circumstances.

” Innovative skills. Sees opportunities often invisible to others.

” Results-orientated. Requires the drive that only comes from achieving the goals they have set for themselves.

” A risk-taker. Often the successful entrepreneur exhibits an incremental approach to risk taking, at each stage exposing him/herself to only a limited, measured amount of personal risk and moving from one stage to another as each decision is proved.

” Total commitment. Hard work, energy and single-mindedness are essential elements in the entrepreneurial profile.

However, two warnings need to be attached to this partial list of entrepreneurial qualities.

First, the selecting individuals for enterprise development training by such a set of attitudes and skills in no way guarantees business success.

Second, the entrepreneurial characteristics required to successfully launch a business are often not those required for a business that experiences growth. The situation becomes vastly different once it grows to any size, making the skill set a different organism. The role of the entrepreneur needs to change with the business as it develops and grows, but all too often he or she is not able to make the transition.

Visionaries and Managers

In new and emerging businesses, the person who starts the business is often an entrepreneur or a visionary.

The visionary who starts a business with a fresh idea — to make something better or less expensively, to make it in a new way or to satisfy a unique need — is often not primarily interested in making money. The visionary wants to do something that no one else has done because they can; it is interesting and exciting, and thus meeting a need. Once the business begins to have some success, the nature and processes change. This ultimately requires a different skill set than the person with the vision.

At this stage, the infant business experiences its first set of challenges:

” How does the visionary entrepreneur transfer the skills and the inspiration that made the little enterprise a success into something larger?

” How does the business deal with cash flow constraints?

” How does it obtain the legitimacy necessary to enable it to borrow?

Often, the visionary is not interested in these issues. Visionaries are notoriously poor at supervising staff, negotiating with investors, or training successors. The business now needs a professional management focus, which calls on a different set of skills, to manage and sustain growth, that are distinct from the skills necessary to start an enterprise and promote a vision.

Applying management skills allows the adolescent enterprise to continue to do well, but the business culture begins to change. The emphasis of management is structure, policies, procedures and most important, profitability. Therefore, the business reaches the next challenge: The maturing enterprise now requires a management structure or governance to create checks and balances and to ensure that the management focus does not become too powerful and overwhelm the entrepreneurship necessary to create rapid growth and access new markets.

Businesses in emerging industries go through these three stages characterized by vision, management, and governance. Upon developing into an institutionalized company with appropriate governance structures, the business encounters a new set of challenges that are common to all industries:

” How does the business preserve its vision?

” How does it balance growth, risk, and profitability?

” How does it establish a governance system that holds management accountable without undermining its independence and flexibility?

Conclusion

This business development cycle described above is common amongst successful businesses. The cycle itself raises the issue of what to focus on when attempting to select a business idea to take part in a program such as the TKMPK. The real danger for those involved in selection activities is that of selecting entrepreneurial qualities over managerial skills. This may thereby condemn the business to uneven growth, poor management and ultimate failure, as the enterprise does not respond adequately to new market and trading conditions. A further danger is attempting to select people over ideas.

The focus of any predicative element in the selection process, therefore, needs to be on a balance of both entrepreneurial and managerial qualities. And the major determinant in selecting a participant for business management training must remain the business idea itself.